Retail development surges in Ecuador

March 2, 2011by smalcolm

By María Bird Picó

When the Quicentro Sur mall opened in Quito, Ecuador, last September, the country’s biggest bank, Banco Pichincha, opened three high-tech, nonstaffed branches in it. The city’s tech-loving northern residents like them. Those in the southern neighborhoods, however, sulked. So the bank plans to open a staffed branch there this year.
There you have Quito: a city of contrasts.

“Quito is a city, but in reality it is three cities within one,” said Miguel Chiriboga, general manager of DK Management, Ecuador’s biggest mall developer and owner of Quicentro Sur.

At over 9,000 feet above sea level, San Francisco de Quito is the second-highest capital city in the world, after La Paz, Bolivia. It is also quite small, with its 1.8 million inhabitants occupying an area of nearly 1,700 square miles. The hilly topography separates the long, narrow city into three distinct areas. The central area houses the colonial old city; the northern zone is the modern Quito, with its financial district, upper-class residential areas, shopping malls, office buildings and the international airport; southern Quito is mainly industrial and home to the city’s working class.

But for all that compactness, getting around Quito is hardly easy. “As a mountainous city, it is not easy to organize traffic,” said Marcel Scholem, director of Centros Comerciales del Ecuador. “Crossing the city right through the middle from one extreme to the other can take up two hours.”

This is good news for developers, because they can tailor malls to the areas where they are. In the city’s northern Cumbayá district, Centros Comerciales del Ecuador is building Scala Shopping, a 450,000-square-foot mall scheduled to open in September 2012. Scala will feature a tenant mix to appeal to the upper-middle and upper-class families in this growing part of town. It will be a tad more upscale than the developer’s Condado Shopping, which opened in 2007 in Quito’s north and receives some 1.2 million visitors per month.

Ecuador has seen steady development of shopping centers, and not just in Quito. Today there are 77 centers in the country, serving an increasingly affluent population. “The number of shopping centers in Ecuador has been increasing, opening the possibility of entering new markets in a faster and easier manner,” said William Marcovici, general manager of Eta Fashion, an Ecuadorian family-apparel chain of 18 stores.

Ecuador’s adoption of the dollar in 2000, following a 6 percent contraction of its GDP in 1999–2000, brought economic stability. Inflation and interest rates eased, and the arrival of long-term financing made home and car purchases possible for a growing middle class. The economy grew 5.5 percent from 2002 to 2006, and last year it expanded by 2.4 percent. Rafael Correa has been president since 2007, and despite his socialist leanings, he has respected private investment.

But for all this growing prosperity, it is essential for developers and retailers to understand the idiosyncrasies of consumers in northern and southern Quito. “The way southerners and northerners handle social status is quite different,” said Gilberto Mantilla, president of Centro Comercial El Recreo, in the south. “Northerners like to outwardly show off their social status and prosperity by dining out and wearing designer apparel; southerners are more inward, liking to spend money on things they can enjoy at home with their families, like flat screen [TVs], kitchen appliances and supermarket food.”

With its flagship, 15-year-old Quicentro mall in the north, DK Management is familiar with the differences. While the average shopping ticket in Quicentro is $500, in Quicentro Sur it is just $100. Quicentro Sur consumers use cash to pay for 80 percent of purchases, while Quicentro’s more affluent clientele favor credit in 70 percent of their transactions, Chiriboga says. “It’s no secret that consumers in the south limit spending to what they have in cash, while northerners are more prone to get into debt,” said Chiriboga.

Another notable difference is the prevalence of appliance, electronics and service retailers in the southern malls, with fashion retailers leading in the city’s opposite section. There are still other contrasts. On weekends, entire families visit Quicentro Sur — hence the bright, attractive 2,000-seat food court featuring predominantly Ecuadorian food chains. Sister Quicentro has a 1,200-seat food court with mostly international cuisine that attracts primarily groups of friends as well as individuals on solo shopping trips, Chiriboga says.

Southerners still make fewer than 20 percent of their purchases at malls, and the Quicentro Sur strategy during its first four months was to emphasize that, as classy a place to shop as it may appear, the mall is affordable. This year’s goal, Chiriboga says, is to get people to spend more there.

The 430-store El Recreo mall in southern Quito has responded to the new competition by investing $2 million for a new facade, and an interactive water fountain.
Meanwhile, with Scala on the way and new shopping options in suburban Quito, northern Quito malls are disinclined to rest on their laurels. Mall El Jardín redesigned its food court in 2004 and more recently brought in Adidas, Benetton, Chevignon, Mango and Reebok.

Over the past two years, DK Management has invested some $10 million in remodeling and expanding Quicentro. It is boosting its appeal to the affluent shopper with the addition of such upmarket names as Adolfo Dominguez and Chevignon.

One of the oldest malls in Quito, the 29-year-old Centro Comercial El Bosque, views this slew of competitors with notable nonchalance. With its 329 stores, the condominium mall says it has on its side a captive residential market and ample parking, which is why 75 percent of its visitors spend money at the mall rather than just go for a stroll, says Patricia Yépez, the general manager. “For this year we expect to maintain the growth sales trend,” said Yépez, “backing our tenants with attractive promotions and big surprises.”

This story is from the spring 2011 issue of Shopping Centers Today LatinoAmerica.

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Founded in 1957, ICSC is the premier global trade association of the shopping center industry. Its more than 63,000 members in over 100 countries include shopping center owners, developers, managers, marketing specialists, investors, retailers and brokers, as well as academics and public officials. As the global industry trade association, ICSC links with more than 25 national and regional shopping center councils throughout the world.